While the
5G ecosystem and investments remain healthy, the global roll-out of 5G is
expected to take a hit as the coronavirus pandemic delays trials, and the
supply chain faces shortages and becomes more unpredictable from the lockdowns
imposed. Raymond Tan
reports.
Will 2020 remain the ‘Year of 5G’?
In March, the Global Mobile Suppliers
Association (GSA) reported that 70 operators have launched commercial 5G in 40
countries. Compared to the same time last year, only 11 globally announced
limited 5G services and 201 were then investing in 5G.
However, forced isolation measures by
countries fighting the coronavirus pandemic and the prospect of a growing
global economic slowdown are threatening to put a break on 5G deployments and
impede adoption.
“The 5G market was growing faster than
anticipated, with 2020 expected be the starting point for 5G Standalone (SA)
core commercial deployments in Communications Service Providers’ networks. But
that expectation may take a little longer to materialise,” explained Don
Alusha, senior analyst at ABI Research, in its latest study of the impact of
Covid-19 on 5G.
“Covid-19 will almost certainly derail
further trials and testing to verify the processing performance and stability
of 5G SA networks,” he adds.
The stay-at-home measures are likely to
cause operators to spend more time expanding and densifying their networks – to
manage the huge demand and spikes in network traffic – rather than deploying
new ones.
Globally, 5G deployments may be limited to
smaller and more densely populated cities as operators in new 5G markets spend
more time managing the economic fall-out.
Speaking to APB+ on the 5G outlook, Cheang Wai Keat, Asean Technology Consulting
Leader and Singapore Head of Advisory, Ernst & Young (EY), said that constrained
consumer spending and cashflow concerns are key considerations for operators in
2020.
“In considering the financial viability of
5G, operators will need to evaluate if there is any set of existing IoT
communications technology such as satellite, Wi-Fi and LoRa technologies, which
can do a more cost-effective job than 5G,” he said.
“Liquidity challenges will impact Capex
commitments across operators in the region who may be burdened by existing high
Capex commitments on upgrading networks to 4G.
“Operators looking to invest in 5G
infrastructure will also need to deal with the issue that 5G networks are expected to be an overlay network and not
wall-to-wall to start with.”
Cheang advised that to navigate the
challenges during this period, operators should focus on developing asset-lite
models, active and or passive infrastructure sharing, digital adoption, remote
workforce structures, and take a ‘razor sharp’ focus on reducing Opex and
building greater Opex flexibility.
Indeed, operators should look at asset-lite
LoRa wireless modulation that can create long-range communication link.
He added that emerging markets in the region
now face limitations in their 5G device ecosystem and B2C use cases are still
at the developmental stage. As such, operators in these markets would be
cautious in making large-scale 5G investments.
“As mass
adoption of 3G and 4G accelerated
only when chipset and device price points came down, operators in the emerging
markets facing tight cashflows may adopt a ‘wait-and-see’ approach, as they expect price points
to similarly fall for 5G.”
This goes in
line with ABI Research’s global predictions that revenue from 5G deployments
will fall between 20% and 30% this year. The investment shortfall in
modernising telecoms networks may be in the range of US$2 billion-$3 billion in 2020.
Cheang added that operators face supply side
constraints around 5G devices and network equipment availability. As a
consequence, they are focusing on diversifying their supply chains for
resilience, which would collectively slow down the pace of 5G deployments.
With most components for 5G base stations
and smartphones manufactured in China, the launch of new 5G smartphones is also
expected to be deferred as supply chain companies struggle to get production
running.
Globally, smartphone shipments were down 38%
year-on-year at the end of February. In China, for the first time, mobile
shipments in the first quarter dropped 34.7% since the pandemic outbreak.
According to the China Academy of Information and Communications Technology,
this represents the lowest level since 2012 when mobile shipment data was first
published.
The delay is significant as slowdown of the
replacement phone cycle effect will slow the transition to 5G.
At the same time, planned auctions are
likely to be deferred in some emerging markets as governments will anticipate
that these auctions might not attract the level of returns and economic growth
that they hope for, said EY’s Cheang.
“The constraint on network equipment will
get slightly alleviated where operators have spent money in buying the
spectrum. The situation described earlier also shows that regardless of the
pandemic, the rate of implementation of 5G across the region would happen at
different stages depending on each country’s ecosystem.”
As a consequence of Covid-19, the 3rd
Generation Partnership Project (3GPP) – the global organisation that develops
telecommunication standards – has delayed the upcoming release of new 5G
standards by at least three months.
5G device-makers working on industrial IoT
devices or wearables will not have a clearly defined set of standards to build
their devices around. These device-makers may have to reassess project
timelines to ensure that the eventual products will be compatible with newer 5G
devices. This uncertainty could further delay market delivery and impede the
proliferation of 5G devices in the broadcast, media and ICT industries.
Funds meant for 5G pilots and projects are
also likely to be diverted elsewhere by enterprise organisations. To cope with
the impact of the pandemic, spending by the telecoms and ICT industry are being
diverted to remote-working technologies, software-as-a-service applications and
cybersecurity.
Globally, a secondary impact on 5G comes
from the cancellation of major sporting events such as the Tokyo Olympics,
European football leagues – from the English Premier League to the Euro
Championship – and the NBA in the US, events which would have generated more
use and development of 5G broadcasts.
Tokyo, for instance, was supposed to be an
important platform for mobile operators to showcase new 5G use cases beyond
just enhanced-mobile broadband (eMBB), such as 8K virtual reality and other
smart-city applications.
5G unlikely to be derailed
Despite the challenges facing the
industry, EY’s Cheang is confident that operators and the government are
realising that 5G is an enabler of smart cities and key in unlocking IoT
propositions, and will supercharge the next wave of industrial transformation.
“We do expect an overall increased adoption
in 5G use cases around Industry 4.0, especially to improve productivity,
improve efficiency and lower operating expenditures.
“In the short to medium term, 5G adoption
will concentrate on specific areas such as AI traffic forecasting applications
and smart technology applications, where the latter would generate the most
effective ROI for operators,” he said.
Telecoms industry body GSMA reveals that
operators have committed to spending more than US$1 trillion on their mobile
Capex between this year and 2025, with 80% of the spent directed at 5G
networks.
There is ample evidence that the pace of 5G
implementations is still on a steady roll in Asia-Pacific.
NTT Docomo became the first operator to
introduce mobile 5G in Japan, with KDDI and SoftBank planning launches. More
than 500 cities are expected to have access to Docomo’s 5G service by March
2021.
In Australia, Telstra has put planned job
cuts on hold and increased investment in 5G this year as a response to the Covid-19
crisis.
Thailand has issued 48 spectrum licences and
expects to be one of the first South-east Asian countries to launch 5G in the
coming months. Singapore has issued licences to two network providers, with an
initial launch expected next year.
China is leading early adoption and is on a
tear – it has already built more than 160,000 5G base stations covering more
than 50 cities. The 2020 China edition of
GSMA’s Mobile Economy series forecasts that 5G will account for almost half of the country’s mobile
connections by 2025, representing an adoption rate on par with other leading 5G
markets such as Japan, South Korea and the US.
Governments play key role
Remote working and the greater use of
video conferencing is driving a strong business case for 5G technology. 5G will
mean quicker downloads, much lower lag and higher network capacities to stream
and share video and data.
“The shift to remote working, for instance,
will increase the demand for higher bandwidth, UCaaS, AR/VR and
Telepresence-type, which will drive increased 5G adoption. B2B demand will also
be a strong source of demand for 5G’s low latency networks,” said Cheang.
“The pandemic is driving more companies and
governments to consider accelerating pandemic-
proof manufacturing, customer engagement and supply chain through automation
and robotics, with tight data feedbacks and control loops.”
China’s 5G roll-out is expected to be
massive and present investors with significant opportunities. In Wuhan, for
example, Huawei installed a 5G network in a specialist hospital in three days.
5G-enabled robots can now help to take care of patients in the hospital and
take measurements, reducing the amount of time medical staff need to spend with
infectious patients.
Additionally, specialists are using 5G to
control medical equipment in distant centres across the country, allowing them
to remotely diagnose new cases and support local physicians.
Many governments in the region are already
putting large investment plans to drive digital transformation, including
infrastructure, to mitigate the effect of an economic recession.
They also play a vital role in deciding on
which and how much spectrum to release first – be they low-bands (700MHz), mid
to high bands (3GHz-4GHz range) or mmWave. Operators will need to use a mix of
low-band, mid-band, and high-band spectrum to deliver the type of 5G experience
that their customers demand, from coverage across larger suburban areas to
those that can meet ultra-high broadband speeds.
“Governments play a critical role in helping
to accelerate 5G adoption. Given the cashflow challenges currently faced by all
operators, government aid in the form of supportive spectrum pricing,
introducing alternative operating models, additional investment incentives and
tax rebates, similar to the cash bail-out programmes for the pandemic, can help
to rekindle the 5G implementation,” said Cheang.
Global telecoms research firm Analysys Mason
predicts that demand and market output should begin to rise again in the third
quarter of 2020 and is expected to return to where it was in 4Q 2019 by the end
of next year.
Rupert Wood, Analysys Mason’s research
director, said the telecoms industry should stay healthier than almost any
industry in this crisis.
“The resilience of the telecoms sector is largely
due to its emphasis on remote working and entertainment which will undoubtedly
result in the successful performance of fixed broadband services.
“Telecoms should show some of the strongest
post-crisis investments, in part because cashflow is more resilient in the
telecoms sector than it is in most others, and because some governments will
emphasise 5G and fibre in stimulus packages,” said Wood.